Truper Proposal   March 2006   Final Draft
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Truper Proposal March 2006 Final Draft

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  • 1. Evaluating Opportunities in North America • Teleos Overview. • Vulnerabilities within the North American lawn and garden tool industry. • North American retailers are entering Mexico’s retail network. • Changes within the North American retail market. • Truper’s unique position will allow it to take advantage of this situation. The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. 1
  • 2. Teleos Corporate Overview The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. Your business is already successful, but you recognize that in order to continue being successful, your business is going to have to change. Your first success was based on being the most cost competitive in the market; but your market is changing –more competitors are coming close to your price point, and they are being entertained as viable vendors from your customer. Now, you want to innovate, to build a business strategy for ensuring long term success, and you know that to accomplish this, you will have to develop new products and emphasize marketing. 2
  • 3. Perhaps the first step is wanting to better understand the North American market, or perhaps you want to go through a more comprehensive analysis. Many Teleos clients desire a review of their entire channels to market, including a review of their sales and distribution channels, an evaluation of potential North American joint venture partners or a serious investigation into expanding into the country. Whatever yesterday’s success, the needs of your business are changing. Teleos is your solution changing your North American business model. Teleos is the intelligent way to U.S. markets. Family of Services Teleos offers consulting services ranging from business plan development to formal product design review including code and regulatory compliance analysis (UL, FDA, NSF, USP, etc.). Business Plan Business Plan Development services include complete competitor comparisons, Distribution & Sales Development marketing studies (from complete brand name recognition surveys to suggested Channel Analysis product and marketing differentiation strategy analysis), and development of ways for growing your business in North America. Product Design & Development includes design review for acceptability both at the regulatory and consumer levels. These services can be extended to formal product development assistance in transitioning existing technologies into new markets and applications. Distribution & Sales Channel Analysis typically includes a review of whether your business should employ an expansion strategy in North America limited to informal representation, establishing limited distributors, or formally opening your own operation in North America. Management Services offered by Teleos include searching for candidates for you to interview and hire, and Teleos can be retained on an on-going basis for managing new hires as you expand your management team Product Design & into North America. Management Development Services 3
  • 4. Vulnerability of North American Lawn & Garden OEMs The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. Vulnerability of North American Lawn & Garden OEMs • North American Lawn & Garden OEMs are characterized by: – Various conditions of financial distress. – High levels of management turnover, including key account managers who are looking for new opportunities at other OEMs. – Antiquated manufacturing infrastructures. – Over-reliance on low cost sourcing to perpetuate their relationships with key customers. – Poor brand-name recognition. – Too little investment in product development, innovation and marketing activities. The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. 4
  • 5. How This Vulnerability Developed Retailers have begun to bump into one another: The 90s led to extensive advancements in Wal-Mart is so large that it inevitably bumps into logistics which allowed retailers to begin to retail space previously owned by segment leaders develop a strategic advantage for the consumer. like Lowes or Bed Bath & Beyond. As each of Because the vendors had not energized their these retailers attempts to grow and differentiate product development and marketing activities itself from the competition, it must place emphasis during this period of time, the retailers began on innovative products. Desiring new products to become more dominant. At the same and brands consumers recognize, retailers are time, high degrees of retail differentiation finding their vendors are, in many cases, so initialized and segment leaders began to financially weak they can not provide this. dominate (Wal-Mart and Home Depot especially). Consequently, new spaces are opening up for 1980s 2000s vendors capable of filling this gap. During this period of time, the 1990s By 2000, the retail segment leaders had Current Day dominant retail segment leaders become so dominant they had almost complete were not as highly differentiated price advantage over their vendors. A number as they became in the 90s. In of vendors serving the retail community addition, the retailers did not have consolidated, but the newly formed companies as dominant a size advantage over were financially not as strong nor as flexible their OEM vendors as the retailers as they were in the late 70s and early 80s. now possess. Globalization introduced a new competitive This détente led to a status-quo on advantage which served the retailer and further the part of a large majority of the depressed the prices of a variety of goods vendors, who began to rest on the being sold. laurels of their existing product lines and brand status. The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. Deflation’s Aftermath • Retailers have gained a significant price advantage through the benefits of globalization. • The cost to vendors who have not used this to their advantage has been increasingly lower prices retailers are willing to pay. • The underlying premise from the retailer is that lower prices will induce the consumer to buy; however, – This premise has a flaw: namely, it will not last forever. At some point the consumer market will mature and consumers will need new products to begin buying again. • As can be seen in the Home Depot/TTI/Rigid/Ryobi deal, the problem is that when the market finally deflates, the vendors who remain are so financially and organizationally distressed they have lost the ability to innovate and brand. The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. 5
  • 6. This Says Everything … “ … a number of brand recognition studies have showed both the retailers and the lawn & garden companies that consumers have literally no brand name recognition with respect to gardening tools & products …” - Union Tools management team member The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. What This Means • This is dangerous in that it is an indicator of a mature market where price is becoming the sole driver; however, • It is also an indicator of a market ripe for innovation and for basic branding activities. • A company with four core capabilities: strong account management, reasonable pricing, innovative product designs and brand-building marketing, would be able to build a dominant position within this market segment. The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. 6
  • 7. The Wrong Way • New handle. • Identified need to get consumer to interact with product in order to maximize sales. • Identified need to feature product in flyers and point-of-purchase displays. • Actually did neither. • Used to strategically protect existing unit volume potentially lost at major retailers. – This meant getting high volume but losing ability to leverage the value of the design. • No branding activities were developed, no new marketing efforts beyond introduction at key retailers, no repositioning within the real estate at North American retailers. • Net Effect? Innovation without marketing is a short term win. The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. The Right Way • Truly new product (handle & attachment). • New point-of-purchase displays. • New marketing collateral. • New ad campaigns. • Product roll-out selected to find retail customers sensitive to innovation, which meant sacrificing initial volume to take the time to build a brand and maximize profitability. The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. 7
  • 8. Not a Stretch • To some, this type of emphasis on innovation and marketing may seem inconsistent with what they hear North American big-boxes say they desire. • But looking at the new relationship forged by Lowes and OXO, one example of the emphasis on marketing and innovation can be clearly seen. The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. 8
  • 9. OXO Good Grips® • New relationship between Lowes & OXO announced in October of 2005. – Emphasis on line of short-handled garden tools and hardware tools using OXO’s principle of universal design. – Builds on OXO Good Grips® brand name from kitchen utensils. – Builds on OXO’s innovative design. • Why did Lowes have to get someone new to enter shelf space already served by Stanley Tools, Lufkin, Ames, Union Tools and many others? – Because for those companies, the emphasis on lowering product cost forced them to lose their focus on product development and marketing activities. – Ultimately, Lowes knows they need new products with brands consumers desire for their own health. – The OXO style of opportunity is present for Truper in North America. – Someone is going to fill the void, our hope is it will be Truper. The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. North American Retailers Are Entering Mexico’s Retail Business The following “Strategy Canvas” mapping tool is taken from the Harvard Business Review article, “Charting Your Company’s Future” by W. Chan Kim and Rénee Mauborgne. The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. 9
  • 10. North American Retailer’s Strategic Position • A saturated NA retail space means retailers must look elsewhere for the growth their shareholders expect. • Some retailers, probably those that will be more successful in the long-term, are looking to change their business model (Target emphasizing lifestyle design at reasonable cost, Lowes emphasizing the female gardener / home hobbyist). • The path of least resistance for most retailers is to take their existing business model and project it into non-domestic markets. • Wal-Mart and Home Depot have been very public in their intentions to perpetuate their growth by expanding into the markets in China, Europe, Mexico and South America. The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. How Will Walmex Impact Truper? May 31, 2005 – Wal-Mart Press Release: “Mr. Solorzano said there would be no change to Wal-Mart's core business approach in Mexico. ‘We are a very institutional, very disciplined company,’ he said. ‘The values of the company are not going to change.’ Walmex, one of Mexico's largest private employers with nearly 700 stores and restaurants, has identified 200 cities and towns as potential new markets. In 2004, Walmex had record sales of $12.5 billion, more than three times the total sales of its nearest rival. As Wal-Mart has increased it presence in Mexico, opposition to the big-box stores has grown. Critics have said it brings cheap foreign imports that hurt local business.” The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. 10
  • 11. What is the Balancing Point? Truper has brand name recognition by the Mexican customer, which it has wisely used to expand into new product lines primarily through active sourcing projects. Wal-Mart has low but growing brand name recognition by the Mexican consumer, but has a vast array of product lines through its own global sourcing infrastructure. The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. Wal-Mart’s Mexico Strategy Canvas The following canvases are based on Teleos’ research; additional time with Truper would improve the analysis. The traditional Wal-Mart business model is primarily price driven, with very low emphasis on brand or innovation. Quality, Low to High Offerings while somewhat important, is not as significant a driver as price. Price Brand Quality Innovation Service & Support The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. 11
  • 12. Truper’s Mexico Strategy Canvas Low to High Offerings Truper’s business model emphasizes brand recognition and quality, allowing Truper to expand into new SKUs through sourcing activities. This business model will be impacted as Wal-Mart and Home Depot bring a parallel competency to bear in the Mexico retail market. Price Brand Quality Innovation Service & Support The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. Overlapping The Two Strategy Canvases WM will exploit price, turning this into the core of their competitive message. Wal-Mart will attempt and make quality, WM will narrow this gap. innovation and customer service matter less to the Mexican consumer because of the over-whelming price advantage they have over other native retailers and manufacturing OEMs. An Important Question: given Wal-Mart’s price advantage, how will Truper’s advantages in brand, quality, innovation and service protect Truper as Wal-Mart offers lower priced products with increasing consumer brand recognition and quality? Price Brand Quality Innovation Service & Support Truper Wal-Mart Mexico The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. 12
  • 13. Changes Within the North American Retail Market The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. Wal-Mart As A Leading Indicator • Communities resisting new Wal-Mart stores. • Pressure on Wal-Mart to increase employee benefits and hourly wages. • Wal-Mart becoming a symbol for a demographic in America who have lost their blue-collar manufacturing jobs and who see a future of lower wages and less job satisfaction. • Politically astute leaders are beginning to use Wal-Mart as an object lesson they can exploit to their advantage. • New books and documentaries are feeding this populism. The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. 13
  • 14. Wal-Mart’s Struggle as Part of Larger Changes • Wal-Mart’s political problems are unique to its size; however, • Its broader problems are related to its business model – specifically two things: – Its resistance to OEMs who have strong brand names, – Its low-cost emphasis has stripped many organizations of their ability to develop new products as a consequence to lowered overhead structures. The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. Changes to Expect • The growing populism is going to force Wal-Mart to change its employment and vendor practices. • Wal-Mart is already attempting to change its image from “Every Day Low Prices” to a more fashionable & new product driven message. – Other major retailers are going to follow this trend, as evidenced by Lowes’ OXO deal and the continued emphasis on lifestyle products and celebrity product marriages (George Foreman Grill, Martha Stewart Living, Emeril Lagasse Cookware, etc.). • Teleos anticipates large retailers placing greater emphasis on brands and innovative products. • The question is, for companies in the garden tool sector, do they have the where-with-all to take advantage of this? – Or are they sufficiently exhausted to miss this opportunity? The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. 14
  • 15. Truper’s Unique Position The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. Why Truper Is the Company to Take Advantage of These Changes • A corporate culture that values expanding at its own pace through strategic moves that place it in a high degree of control. • A management ethic that reinforces the opportunity to grow, but only if growth is truly mutually beneficial for the retailer and itself. • A recent investment in a product testing center, creating an infrastructure ideally positioned to both certify the quality of every product with a Truper name as well as develop new products. • A company with sufficient stability to challenge the established, but vulnerable, North American retailers who misunderstand that their competition is only from Chinese knock-offs. The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. 15
  • 16. What Are the Opportunities? • Teleos would not suggest a strategy of capturing existing SKUs with existing products unless prevailing business reasons make it necessary. • The North American retail community is primed for a brand-building investment. • If a well-planned and well-executed marketing plan was coupled with some innovative products, the result would be lucrative. • Innovation opportunities exist within the long- handled tool, short-handled gardening appliance, striking tools and climbing products. The information contained in this presentation is CONFIDENTIAL INFORMATION and is the property of Teleos, Inc. Unauthorized review, retention or duplication in any form or fashion is strictly prohibited. Teleos would like to be one of Truper’s partners for the next stage in your growth. We would like to provide additional insight, account management and product design assistance as Truper continues to expand into the North American retail market. Teleos – The Intelligent Way to U.S. Markets. Contact Information Email: info@teleos-inc.com URL: www.teleos-inc.com 16